Related
This new figure comes from research by Giving Evidence for the Law Family Commission on Civil Society. The Commission concludes that funders must take steps to reduce the costs of applying to them, alongside working in collaboration to tackle duplication and complexity.
London Funders' strategy for 2018-21 identified an ambition to strengthen collaboration between funders through (amongst other things) a shared approach to due diligence. This had been generated by members’ experience of collaborating in response to the Grenfell Tower Fire in 2017. The willingness to use the due diligence that other funders have already carried out was tested at scale during the London Community Response in 2020, where members were confident and able to skip this stage and make their grant decisions more quickly. An appetite to develop this approach further outside of crisis is shared between a number of members.
During 2022, London Funders, working with City Bridge Trust, convened three round table meetings and commissioned a survey of members to explore and develop principles for an approach to sharing due diligence.
What does this mean, what are the next steps, and how can funders get involved?
Due diligence is part of the work that all funders do to provide their Trustees with assurance that they are spending their money in line with their charitable objectives.
Due diligence is focussed on risk identification, with key outcomes being to:
- Ensure that funds are not given to those who are seeking to abuse the charity, and
- confirm that beneficiaries have met minimum requirements to demonstrate that they will be able to spend the money as intended
Our initial discussions indicated that the practice of “due diligence” is not consistent between funders, with some treating it as a stand-alone process whilst for others it can be part of eligibility checks (to confirm that payments are made to those who qualify as beneficiaries) or grant assessment (to determine how and where best to distribute funds).
A key area which all funders look at, and consistently consider as part of their risk-focussed due diligence, is organisational finance.
However, whilst funders tend to want to know the same things, they do not always ask for it in the same way. This means that for civil society organisations, the risk assessment element of their application can be burdensome and require small but time-consuming differences in approach depending on who they are applying to.
Our initial surveys have shown that not all funders will have the same appetite for risk once the risks have been identified. However, they all have similar views as to which risks they want to consider, and this is particularly true when it comes to finances.
This means there is an opportunity to both reduce the burden on applicants and improve efficiency between funders by finding ways to share their due diligence to highlight risks. This would still leave each funder to determine its appetite for risk, and a principle of this project is that there should always be an asset-based approach that looks for potential rather than for exclusions.
There are options emerging as to how this could be pursued in practice:
- all funders in an area (e.g. a borough) agree that applicants provide the same volume and format of financial information for any application (and agree on thresholds for the size of grants where increased due diligence is needed)
- going further, developing a single shared platform for London where applicants upload their key organisational information, giving password-protected access to funders as and when they apply to a programme. Funders use the platform to record calculations/financial analysis (without reporting on conclusions or decisions to accept/reject). This means applicants would only upload information once (each year), and it would also reduce the work subsequent funders would need to do.
These options offer a range of potential improvements to process and consistency. The outcome would be to make things easier and not more difficult for applicants, especially for marginalised groups that find it hard to secure funding. Funders agree that a shared approach would develop trust and transparency between funders and civil society organisations, save time and costs for both applicants and grant managers, raise knowledge about due diligence requirements in civil society and create an asset-based funding approach across London, seeking to rule organisations in rather than out.
Today we’re publishing an Options Paper - you can read more about how we’re developing our thinking here.
And now we want to hear from you. We want to know if you are interested in participating in a trial of any or all of the suggested approaches – if so, please get in touch by emailing Geraldine at geraldine.blake@londonfunders.org.uk
So far, 17 members have been involved in developing these ideas. We’ll be bringing people back together in the next few months to start putting ideas into practice. And we’ll also be engaging with civil society to ensure that a shared approach works for them. If you’d like to join the jolly crew, get in touch with Geraldine.